Question

If a company has total assets of $13,100,000; net earnings of $1,400,000; 900,000 average shares of common stock outstanding; total stockholders' equity of $5,700,000; and preferred stock of $500,000, what is its book value per share?

Answer 1

The book value per share is calculated by subtracting the value of preferred stock from the total stockholders' equity, then dividing by the number of outstanding common shares. In this case, the book value per share is $5.22.

Step-by-step explanation:

To calculate the book value per share of a company, we need to first understand the book value itself. The book value is determined by taking the total stockholders' equity and subtracting any preferred stock. Once we have this value, it is then divided by the average number of common shares outstanding to find the book value per share.

In this case, the company has total stockholders' equity of $5,700,000 and preferred stock amounting to $500,000. Subtracting the preferred stock from the equity gives us $5,200,000 ($5,700,000 - $500,000). The number of average shares of common stock outstanding is 900,000. Therefore, to find the book value per share:

Book Value per Share = ($5,200,000 Equity - $500,000 Preferred Stock) / 900,000 shares

Book Value per Share = $5.22